Fourth Quarter 2019 Earnings Conference...

FOURTH QUARTER 2020

Earnings conference call

February 16, 2021

Karen Lynch | President & Chief Executive Officer

Eva Boratto | Executive Vice President & Chief Financial Officer

2 ©2021 CVS Health and/or one of its affiliates. Confidential and proprietary.

Cautionary statement concerningforward-looking statements

This presentation includes forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of CVS Health Corporation. By their nature, all forward-looking statements are not guarantees of future performance or results and are subject to risks and uncertainties that are difficult to predict and/or quantify. Actual results may differ materially from those contemplated by the forward-looking statements due to the risks and uncertainties related to the COVID-19 pandemic, the geographies impacted by and the severity and duration of the pandemic, the pandemic’s impact on the U.S. and global economies and consumer behavior and health care utilization patterns, and the timing, scope and impact of stimulus legislation and other federal, state and local governmental responses to the pandemic, as well as the risks and uncertainties described in our Securities and Exchange Commission filings, including those set forth in the Risk Factors section and under the heading “Cautionary Statement Concerning Forward-Looking Statements” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

This presentation includes non-GAAP financial measures that we use to describe our company’s performance. In accordance with SEC regulations, you can find the definitions of these non-GAAP measures, as well as reconciliations to the most directly comparable GAAP measures, on the Investor Relations portion of our website.

Link to our non-GAAP reconciliations

https://investors.cvshealth.com/files/doc_financials/2020/q4/Q4-2020-Non-GAAP-Reconciliation.pdf


on GAAP diluted and Adj EPS, primarily investments in HCB

in cash flow from operations

Committed to disciplined capital allocation priorities

FY Adj EPS growth of ~6%Q4 Adj EPS of $1.30

Q4 estimated COVID adverse impact of ($0.43) – ($0.45)

2020 highlightsStrong underlying performance; FY 2020 Adj. EPS of $7.50

Strong performance across the Enterprise

as we executed on our strategy and adapted

to meet the changing needs of those we serve

Reflects year-over-year growth in PSS and HCB

Q4 Adjusted Revenue growth of 3.5%

Primarily in HCB and Retail/LTC

Reflects outperformance in PSS

FY Generated $15.9 billion Achieved low 4x’sleverage ratio at end of year


Accelerating aspects of our consumer-focused strategy meeting the diverse health needs of consumers in communities across America

Demonstrating the integrated value of our unique products and services

Enhancing the consumer experience through our digital services and platforms

Expanding our innovative, consumer-oriented solutions that improve health and lower medical costs

Building high-performing organization passionate about our Purpose


CVS Health continues to

lead nation’sCOVID-19 response

~8MNew customers to CVS Health

through testing

~15Mtests

administered

>40KLTC Facilities using CVS Health

• ~90% of second doses complete at SNFs*

• 85% of first doses complete at ALFs*, second doses expected to complete by Mid-March

>3Mvaccinations

administered at LTC facilities

>40%of Return Ready clients are new to CVS Health

Represents information through February 12, 2021

* SNFs defined as Skilled Nursing Facilities. ALFs defined as Assisted Living and Other LTC Facilities


2020 Financial Review


2020 2019 Change %

Total adjusted revenues1 $268,395 $256,776 4.5%

Adjustedoperating income $16,008 $15,339 4.4%

GAAP EPS $5.47 $5.08 7.7%

Adjusted EPS $7.50 $7.08 5.9%

Cash flow from operations $15,865 $12,848 23.5%

in millions, except per share data

FULL-YEAR 2020 RESULTS

Consolidated resultsAchieved over $900 million of integration synergies

Interest expense of $2.9 billion

Adjusted effective tax rate of 25.9%

Weighted-average diluted share count: 1,314 million shares

COVID-19 contributed 22 – 27 cents to FY 2020 GAAP and Adjusted EPS

1. Total adjusted revenues remove the receipt of $313 million owed to CVS Health under the ACA’s risk corridor program, net of MLR rebates of $2 million in Q4 2020 that had previously been fully reserved.


FULL-YEAR 2020 RESULTS

Capital and cash flow allocationFY20 results demonstrate strong cash flow from operations

Strong cash generation

• $15.9 billion full-year cash flow from operations, ~23% growth over prior year

• Strong cash flow growth reflects Enterprise performance, working capital improvements and timing

• Paid $2.6 billion in shareholder dividends

• Commitment to disciplined capital allocation priorities

Continue to prioritize paying down debt

• Repaid $4.25 billion of net debt

• Exited year at low 4x’s leverage ratio

• On track to achieving our low 3x’s leverage target in 2022


Q4 2020 Q4 2019 Change %


Adjustedoperating income $2,945 $3,766 (21.8%)

GAAP EPS $0.75 $1.33 (44.1%)

Adjusted EPS $1.30 $1.73 (25.1%)

Cash flow from operations $3,567 $2,634 35.4%

in millions, except per share data

Q4 RESULTS

Consolidated results

Interest expense of $678 million

Adjusted effective tax rate of 26.8%

Weighted-average diluted share count: 1,317 million shares

COVID-19 adversely impacted Q4 2020 GAAP and Adjusted EPS by (43) – (45) cents

1. Total adjusted revenues remove the receipt of $313 million owed to CVS Health under the ACA’s risk

corridor program, net of MLR rebates of $2 million in Q4 2020 that had previously been fully reserved.


Q4 RESULTS

Health Care Benefits segmentAdjusted Revenue growth primarily driven by membership growth in Government products and HIF, partially offset by divestitures of Aetna’s PDP and Workers’ Compensation business, Commercial membership declines and planned COVID-19 related investments

Adjusted operating income decline primarily driven by the planned COVID-19 related investments, testing and treatment costs, and divestitures of Aetna’s PDP and Workers’ Compensation business. Partially offsetting the decline was lower utilization in non-COVID categories

Medical membership growth driven by increases in Medicaid and Medicare products, partially offset by a decline in Commercial products

Higher MBR primarily reflects COVID-19 related investments, testing and treatment costs, partially offset by reinstatement of HIF as well as lower non-COVID related costs

in millions, except MBR Q4 2020 Q4 2019 Change %


Adjustedoperating income $153 $779 (80.4%)

Total medical membership 23.4 22.9 2.2%

Commercial 16.9 17.7 (4.8%)

Government 6.5 5.2 26.2%

Adjusted medical benefit ratio (MBR)1 88.3% 85.7% (260 bps)

Note: Q4 2020 GAAP MBR of 86.7%

1. Total adjusted revenues and adjusted MBR remove the receipt of $313 million owed to CVS Health under the ACA’s risk corridor program, net of MLR rebates of $2 million in Q4 2020 that had previously been fully reserved.


1. Total pharmacy claims processed and generic dispensing rate for all periods presented include an adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions.

Q4 RESULTS

Pharmacy Services segment

in millions Q4 2020 Q4 2019 Change %

Total revenues $36,355 $37,073 (1.9%)

Adjustedoperating income $1,561 $1,447 7.9%

Total pharmacy claims processed1 537.9 533.9 0.7%

Revenue decline primarily driven by previously

disclosed client losses and continued price

compression, partially offset by growth in Specialty

pharmacy and brand inflation

• Specialty pharmacy revenue growth of ~4% YoY

due to net new business and brand inflation

Adjusted Operating Income growth primarily driven

by improved purchasing economics and Specialty

pharmacy growth, partially offset by continued price

compression

Growth in Total Pharmacy Claims Processed1

primarily due to net new business


Q4 RESULTS

Retail / LTC segment

in millions Q4 2020 Q4 2019 Change %

Total revenues $24,062 $22,580 6.6%

Adjustedoperating income $1,775 $2,031 (12.6%)

Prescriptions filled1 376.3 369.0 2.0%

1. Retail/LTC prescriptions filled includes an adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions.

Revenue growth driven primarily by increased prescription volume, including strong flu immunizations, as well as increased COVID-19 diagnostic testing and brand inflation, partially offset by continued reimbursement pressure and impact of recent generic introductions

• Total revenue from COVID-19 diagnostic testing program of ~$400M in the fourth quarter

• Growth was offset by lower cough and cold sales and lower scripts from flu and flu like illness

Adjusted Operating Income decline due to continued reimbursement pressure and the net impact of the COVID-19 pandemic, partially offset by pharmacy volume and improved generic purchasing

COVID-19 vaccine administration had an immaterial impact on the fourth quarter


in millions Change vs. Q4 2019

Retail pharmacy script share of 27.24%1, 2 Up ~30bps

Same store sales3 5.3%

Pharmacy sales 7.5%

Pharmacy prescription volume2 2.9%

Front Store sales (1.8%)

Q4 RESULTS

Retail pharmacy

1. Source: IQVIA retail pharmacy script data for Q4 2020. IQVIA is restating the methodology for market share data and CVS Health disclosures will align to the restatement in its Q1 2021 disclosures.2. Retail pharmacy prescriptions filled includes an adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions. 3. Same store sales and prescription volume exclude revenues from MinuteClinic and revenues and prescriptions from long-term care operations.

Same store sales growth driven by strength in Pharmacy; Retail pharmacy script share increased

Growth in prescriptions filled primarily driven by continued adoption of patient care programs, partially offset by reduced new therapy prescriptions, including the effect of lower flu and flu like illness

Front Store sales decline primarily due to decreased customer traffic and reduced volume in cough and cold product sales largely as a result of the COVID-19 pandemic and a milder flu season


Q4 RESULTS

Estimated impact of COVID-19 on Q4 financials

COVID-19 related business activity adversely affected Q4 2020 GAAP diluted EPS and Adjusted EPS by (43) – (45) cents

Retail / LTC Health Care Benefits

• Planned investments made in our customers and members and provisions for potential payments to clients and plan sponsors for contractual and regulatory requirements

• Testing and treatment costs

• Overall utilization was generally in-line with our baseline, including higher COVID-19 related costs

• Pharmacy volume impacted by reduction in new therapy prescriptions, including lower seasonal flu prescriptions; Reduced cough and cold season also impacted Front Store traffic and volume

• Benefits from diagnostic testing program

• Incremental costs for operations including readiness for vaccination administration


2021 Guidance


in cash flow from operations

Cost Savings Initiatives

Maintaining dividend of

$2.00 per share

Adj EPS between $7.39 - $7.55

Capital expenditures of

$2.7 - $3 billion

increasing investments

in technology and digital enhancements

FY 2021 OutlookFocused on delivering long-term sustainable growth for our shareholders

Focused on advancing strategy through digital enhancements,

producing value from integrated offerings,

and new innovative, consumer driven products

Expected to drive between

$900 million to $1.1 billion in savings

Revenue growth between 3% - 4.5%1

Expect growth across all segments

4% to 6% growth vs baseline of $7.11

Generate $12 - $12.5 billion

1. Revenue growth is calculated off Adjusted Revenue for full year 2020.


GUIDANCE: FULL-YEAR 2021

Enterprise outlookProven agility and strength of our Enterprise driving continued growth

Guidance reflects return to traditional levels of medical costs and physician visits throughout the year, and ongoing administration of COVID-19 testing and vaccinations. Vaccine administration is dependent on availability of supply

COVID-19 is expected to have an immaterial impact on Adjusted EPS

2021 reflects continuation of cost savings initiatives across the Enterprise

Note: Percentages represent year-over-year growth from reported 2020 results.

1. Growth rates for total revenues are calculated against 2020 adjusted revenues. 2020 adjusted revenues removes the receipt of $313 million owed to CVS Health under the ACA’s risk corridor program, net of MLR rebates of $2 million in Q4 2020 that had been previously reserved. 2. Growth rate for Adjusted EPS is calculated against 2020 baseline EPS of $7.11 which excludes net realized capital gains/losses and favorable prior years’ development, the divestiture of the workers’ compensation business and the impact of COVID-19 on business operations. 3. Guidance assumes consistent government regulations.

In billions, except per share data FY 20213

Total revenues1 $276.1 to $280.63.0% to 4.5%

Adjusted operating income $15.5 to $15.7(3.25%) to (1.75%)

GAAP EPS $6.06 to $6.2210.75% to 13.75%

Adjusted EPS$7.39 to $7.554.0% to 6.0%2


Projected total revenue growth is driven by continued strength in Medicare products

Projected adjusted operating income reflects removal of HIF, strong growth in Medicare membership, and cost savings initiatives. COVID-19 is estimated to have a ($550M) to ($450M) unfavorable impact for the year

Projected MBR includes the return to more normal levels of utilization, removal of HIF, lower risk adjusted revenue and mix shifts in our business

Projected medical membership reflects continued strength in Government products; We expect Commercial products to be stable overall with some segments growing, while others are expected to contract


Health Care Benefits outlook


1. Growth rate for total revenues is calculated against 2020 adjusted revenues. 2020 adjusted revenues remove the receipt of $313 million owed to CVS Health under the ACA’s risk corridor program, net of MLR rebates of $2 million in Q4 2020 that had been previously reserved.

in billions, except MBR and trend FY 2021

Total revenues1 $79.4 to $80.75.5% to 7.25%

Adjusted operating income $5.1 to $5.2(17.5%) to (16.0%)

Medical benefit ratio (MBR) 84.7% +/- 60 bps

Total medical membership 23.2 to 23.6

Commercial 16.6 to 16.9

Government 6.6 to 6.7


Projected revenue growth attributable to net new business, continued strong growth in Specialty pharmacy and brand drug inflation

Specialty revenue growth expected to be mid-single digits

Projected growth in adjusted operating income driven by continued growth in Specialty and our ability to drive further improvements in purchasing economics, partially offset by industry-wide pricing compression

Projected claims volume driven by net new business and the expected return in provider visits


1. Total pharmacy claims processed includes an adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions.


Pharmacy Services outlook

In billions FY 2021

Total revenues $144.5 to $147.01.75% to 3.5%

Adjusted operating income $6.0 to $6.15.5% to 7.25%

Total pharmacy claims processed1 2.17 to 2.202.75% to 4.0%


(1.6)

3.3

($, billions)

Gross new business

Net new business

2021 Selling season largely complete with

retention rate of ~98%1

Driving pharmacy penetration in 2021 Aetna

book to deliver ~$350M in incremental

revenue2

AS OF JANUARY 2021

2021 PBM selling season

Non-renewals

4.9

1. Retention rate is defined as: 1 less (estimated lost revenues from any known terminations plus annualization of any mid-year terminations, divided by estimated PBM revenues for that selling season year) expressed as a percentage.2. Aetna incremental revenue is not included in the 2021 PBM selling season chart above.3. Chart excludes any impact from Medicaid fee-for-service carve-outs.



1. Prescriptions filled include an adjustment to convert 90-day prescriptions to the equivalent of three 30-day prescriptions.

Prescriptions filled includes vaccinations administered.


Retail / LTC outlookProjected growth in adjusted operating income driven by pharmacy volume, COVID-19 diagnostic testing and vaccinations and cost saving initiatives, partially offset by continued reimbursement pressure. The benefit from COVID-19 is expected to be between $400M to $500M. Vaccine administration is dependent on availability of supply

Projected adjusted script growth driven by the continued successful execution of our patient care programs, expected return of provider visits and COVID-19 vaccinations

Front Store traffic is expected to increase as we move through the year

In billions FY 2021

Total revenues $93.8 to $95.12.75% to 4.25%

Adjusted operating income $6.6 to $6.77.5% to 9.0%

Prescriptions filled1 1.57 to 1.607.25% to 9.25%



Other items

In billions, except tax rates FY 2021

Interest expense ~$2.6

Capital expenditures $2.7 to $3.0

Adjusted effective tax rate ~25%

Weighted-average diluted share count ~1,325

Cash flow from operations $12.0 to $12.5

Expected gross capital expenditures are above historical levels as we expand investments in technology and digital enhancing our apps and system workflows and we continue to invest in HealthHUB

locations

Lower effective tax rate primarily due to the repeal of the HIF in 2021


First quarter expected to be the lowest earnings quarter for the year

In Retail/LTC, lower front store traffic and script volume have persisted into the first quarter in part due to the weaker flu season. Q1 is also affected by investments to advance our vaccination program

Earnings for Health Care Benefits is expected to be higher in the first half of the year and lowest in the fourth quarter

Cost savings initiatives across our segments are expected to ramp over the course of the year


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